Tata Comm Debt Mountain Keeps Rising

Tata Communications's $2 Bn capex plans are quickly loosing debt options and other miracles will have to be worked out.

It alluded to this in its annual report for 2008-09, where its debt obligations almost doubled to Rs 6,665 Cr.

However, with the government still holding 26% in the once-state-owned company earlier known as Videsh Sanchar Nigam (VSNL), its options for raising non-debt funds are limited.

“The company may need to resort to additional long-term debt and working capital lines of credit to meet future financing needs, with the possibility of raising non-debt funding being limited at this juncture. This would increase the debt servicing obligations,” the annual
report said.

Tata Communications spokesman clarified that the company has been using debt and cash from its operations as a source of funding. “We anticipate that we will continue to do so to fund our planned investments,” he added.

According to analysts, the upcoming auctions for radio frequencies to offer wireless broadband, or WiMax, services will ensure that Tata Communications’ balance sheet stays stretched this fiscal.

During 2008-09, Tata Communications’ debt almost doubled from Rs 3,346.5 crore at the start of the year as it borrowed aggressively to finance various projects and fund the capital requirements of its subsidiaries. At the net level, the company’s debt situation is better.

Its net debt at the end of FY09 stood at Rs 4,342 crore. It also has Rs 876 crore in cash, Rs 700 crore in mutual funds and investments worth Rs 748 crore in Tata Teleservices (TTSL), the Tata group’s telecom services arm.

The company, which was India’s first Internet provider, has already sold a part of its stake in TTSL to Japan’s NTT DoCoMo for Rs 424 crore. It made a profit of Rs 347 crore on this transaction. Tata Communications is also consolidating its subsidiaries and plans to bring down their number from 48 to some 30, report added.

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